The Financial Conduct Authority’s (FCA) upcoming review of its Consumer Duty guidance has drawn pointed observations from Michael Shand, Managing Principal at Capco, who urges caution as the FCA seeks input on refining its conduct requirements.
With the FCA’s Call for Input closing on 31st October, Shand emphasises the importance of this review as a step towards enhancing consumer protection standards in financial services.
“The deadline is an important step in refining the FCA’s conduct rules and should be welcomed by the industry,” Shand stated. He highlighted that the current Consumer Duty framework is intentionally designed around consumer outcomes rather than prescriptive rules, leaving firms to interpret and implement practices that meet these goals based on data and evidence. This flexibility, while beneficial, also means that firms carry the responsibility to ensure they are effectively meeting consumer needs.
Shand sees this flexibility as both an advantage and a risk. While some of the UK’s more mature financial services firms have already adapted their operations to this outcome-focused approach, Shand believes there is room for improvement. The FCA review presents a unique opportunity for firms to propose adjustments that could refine and clarify these outcomes further, helping ensure consistency and effectiveness across the sector.
Shand warns that moving too quickly towards a streamlined, high-level approach could introduce risk if firms begin to interpret the standards too variably. “The FCA must be cautious: simplifying rules and relying too heavily on high-level guidance could lead to ambiguity, as firms might interpret their conduct obligations differently,” he noted, suggesting that before reducing any specific rules, the FCA should closely assess firms’ readiness in embedding these outcomes into their culture.
Shand believes that the sector’s most mature players have embraced the Consumer Duty’s data-backed focus, which allows for more effective internal oversight while reducing unnecessary bureaucracy. However, he noted that readiness varies widely across the industry, meaning that high-level guidelines could create gaps in compliance among firms at different levels of preparedness.
In addition to concerns about readiness, Shand underscored the financial advantages that could emerge from clearer and more efficient Consumer Duty standards, including lower compliance costs and a streamlined oversight process. But, he added, any change needs careful balancing with practical guidance to ensure alignment across the sector.
As the FCA’s consultation period comes to a close, Capco’s observations reflect the tension between regulatory flexibility and operational consistency, leaving the FCA with a complex decision as it seeks to support consumer protection without imposing undue compliance burdens on firms across the financial services landscape.
